The German real estate crash that never happened

Doomsayers bet that Germany’s property prices would plummet, the logical reasoning being that prices were inflated due to low interest rates. But what these people did not understand was that prices are determined by both supply and demand. It is the German real estate crash that never happened.

And that, according to empirica regio GmbH, Germany faces an immediate shortage of around 800,000 properties. With an annual need for 200,000 new properties just to support Germany’s growing aging population.

The main leading indicators such as new and approved building permits show that projected supply will remain low as builders face rising construction costs and tighter energy restrictions.

The latest real estate transaction data in March shows that the German house price index has increased slightly for the second month, likely pointing to a new price equilibrium in the market.

Specifically:

🔼 Prices of existing apartments rose slightly in March.

🔼 Prices of newly built homes continued to rise, reaching a new record.

⬇️ Prices for existing homes are still slightly lower

The index shows that we have experienced a maximum total fall of around six percent from the peak in June despite the fastest rise in interest rates in history.

What we are now seeing is that buyers are resetting their expectations and sellers are still holding out for lower prices.

Anecdotally, real estate agents are seeing more turnout of buyers for cheaper properties, some bidding resumes. Bargaining remains a key strategy to afford more.

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